The beginning of the end

The beginning of the end

Over the weekend Novo Nordisk (NYSE:NVO) announced that they had received a complete response letter from the FDA for new long acting insulin’s Tresiba® and Ryzodeg®. According to a press release issued by the company;

“In the letter, the FDA requests additional cardiovascular data from a dedicated cardiovascular outcomes trial before the review of the New Drug Applications can be completed. Novo Nordisk is evaluating the content of the Complete Response Letter and will work closely with the FDA to provide the requested data. Novo Nordisk does not expect to be able to provide the requested data during 2013.

In the letter, the FDA also states that approvals for Tresiba® and Ryzodeg® cannot be granted until the violations cited in the previously announced Warning Letter, dated 12 December 2012, have been resolved.”

While they are jumping for joy at Sanofi (NYSE:SNY) and Lilly (NYSE:LLY), these smiles will soon turn into frowns when they realize while this news will help them in the short term, it will do nothing to change the long term outlook of the insulin market, a market which is about to face a series of patent cliffs. The harsh reality is insulin, both short and long acting, is becoming a commodity and payors will use the mere threat of generic insulin to demand further price concessions.

Novo had hoped Tresiba and Ryzodeg would lessen the impact from the coming commoditization of the insulin market thinking that the two products could differentiate themselves from the competition. Frankly Diabetic Investor was never that impressed with either drug as while they do bring something slightly different to the table, this difference is so slight we were skeptical it would be enough to convince physicians or payors to widely adopt either drug.

The big question is what Novo does next, as they already have millions invested here. Knowing how the company operates Diabetic Investor would say it’s a longshot that the company would walk away from either drug. However, the timeline to market, now a mystery, places the company in extraordinarily difficult position as even if the drugs do make it to the marketplace they would come to market just as a generic version of Lantus was arriving.

Equally problematic is even with an approval both drugs are already damaged goods as once again the Avandia controversy comes into play. Wonder how Novo feels today as they actually hired that cardio crusader Dr. Steven Nissen, the person who is almost directly responsible for this complete response letter. Thanks to the good doctor no diabetes drug is safe from the FDA and their increased attention to every possible side effect whether these side effects are real or imagined. Like it or not this is the world diabetes drug and device companies live in.

The real truth is that freight train that hit and decimated the glucose monitoring market, has found a new set of rails and is now headed directly towards the insulin market. Insulin, like glucose monitors, will become a commodity where price rules over performance. Unlike glucose monitors, insulin companies face the very real threat of generic competition which is like throwing gasoline on an already out of control fire. As we have noted previously the day of reckoning for insulin companies is coming and will be here before they know it or are prepared to deal with it. Just as the major BGM are now fumbling about dealing with impact of competitive bidding, so too will the insulin companies one day be in the exact same position as the insulin market collapses around them.